|Slash and burn|
Unfortunately, this is not the first time that Nationwide has done this - and where the nation's largest building society goes, others will no doubt follow.
Five different issues of Nationwide PIBS can be sold back under the offer. Two, the 6.875% and 7.25% issues, are redeemable at par (face value) and one, the 7.859% version, will net investors more than face or "par" value, as they will be bought back at a 6.5% premium. However, holders of two issues will get back less than par value if they redeem. The 6.25% PIBS will be bought back at 91% of face value, while holders of the 5.769% issue will suffer a 5% discount to par value - although, to be fair, few holders will suffer an actual loss.
My own investment is the 7.25% PIBS and a repurchase at par gives me a 5% capital gain. Still, its the principle that rankles. Building societies constantly trumpet their integrity but are clearly not averse to some major financial jiggery-pokery.
No doubt the idea is to reduce the cost of capital as well as to realign the capital base with the Basel III rules.What puzzles me slightly is where the £715m is coming from to finance the purchase offer. - not from members or individual investors, clearly.
Nationwide's comment on yet again breaking trust with its providers of capital was pretty self-serving: "The society is inviting holders to tender their securities for purchase as part of its proactive approach to capital management. The offers are expected to improve and strengthen the quality and efficiency of the society's capital base and are designed to provide liquidity to investors. Future decisions with respect to capital calls will be made in light of the then prevailing market, economic and regulatory conditions."
Two other issues of Nationwide PIBS, paying 6% and 7.971%, are not included in the offer. They are callable in 2016 and 2015 respectively. Look out for more tender offers...
I still hold PIBS in the Skipton, Manchester and Principality Building Societies: OK guys - make me an offer!
[Potential sale price: £1.00]
I am not a financial adviser and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.